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COHEN, DURBIN: CONGRESS MUST CLOSE LOOPHOLE THAT ENCOURAGES FOR-PROFIT COLLEGES TO TARGET VETERANS AND SERVICE MEMBERS

June 13, 2019

Press Release

Introduce bicameral legislation to reinstate the 85/15 Rule to require for-profit colleges to bring in more revenue from non-federal sources

WASHINGTON – U.S. Representative Steve Cohen (D-TN-09) U.S. Senator Dick Durbin (D-IL) today introduced bicameral legislation that would help put an end to the for-profit college industry’s aggressive recruiting of veterans, service members, and their families. The Protecting Our Students and Taxpayers (POST) Act would prohibit for-profit colleges and universities from receiving more than 85 percent of their revenue from the federal government and change the calculation of federal revenue to include all federal funds, including Department of Veterans Affairs GI Bill and Department of Defense Tuition Assistance benefits.

The current federal 90/10 rule is a provision in the law that bars for-profit colleges and universities from deriving more than 90 percent of their revenue from the U.S. Department of Education’s federal student aid programs. The other 10 percent needs to come from sources other than the federal government. The purpose of this rule is to ensure that schools are not overly dependent on taxpayer dollars.

Because of the way the law is written, veterans’ and active duty service members’ federal education benefits – such as G.I. bill education benefits and the Department of Defense’s tuition assistance funds – do not currently count toward the 90 percent. As a result, for-profit colleges can receive an unlimited percentage of their revenue directly from federal taxpayers by enrolling large numbers of these students. The law gives for-profit colleges a financial incentive to aggressively recruit and enroll veterans, service members, and their families to their programs.

“For-profit colleges can receive up to 90 percent of their revenue from federal financial aid programs, such as student loans,” said Cohen. “Too often, these schools fail in their duty to sufficiently prepare graduates for jobs that will enable them to repay these loans, leaving taxpayers to foot the bill. Even worse, a loophole in current law allows unscrupulous colleges to receive additional federal funds by enrolling veterans and service members. This loophole encourages bad behavior that weighs down our nation’s heroes with mountains of debt while lining the pockets of wealthy for-profit investors. This is unacceptable. For-profit colleges should be accountable to both the students they claim to educate and the taxpayers who keep their doors open. I am pleased to be working with Senator Durbin to close this loophole.”

“We can’t let this invitation to exploit our veterans and service members continue,” Durbin said. “The current revenue cap, along with the loophole in the law, allows far too much federal money to funnel to an industry that often provides a greater return on taxpayer investment to its executives and investors than it does to its students. We must do better for our veterans, service members, and their families.”

Along with Cohen, the legislation is cosponsored by Representatives Sheila Jackson Lee (D-TX-18) and Gil Cisneros (D-CA-39).

The POST Act would reinstate the original ratio of 85/15 (it was loosened to 90/10 in 1998) and change the definition of what counts as federal revenue so that it includes all federal funds. This new definition would eliminate the powerful incentive for-profit schools to aggressively recruit service members and veterans and ensure that all schools are complying with the law as it was intended. Additionally, the POST Act would count institutional loans (schools can now use Title IV funds from one student to lend to another) in the calculation of federal revenue sources and eliminate a school’s Title IV eligibility after one year of noncompliance instead of the three consecutive years it now takes.

According to data released in 2016 by the U.S. Department of Education – in response to a request by Durbin and 19 other Democratic Senators – because of the loophole, 186 institutions, including some of the largest recipients of GI Bill benefits, received more than 90 percent of their revenue from federal taxpayers – nearly $8 billion cumulatively. Further, more than 566 institutions received more than 85 percent of their revenue from federal taxpayers – $12.6 billion cumulatively. Secretary DeVos has not provided updated data in response to a recent request led by Durbin and Cohen.

The POST Act is supported by: Student Veterans of America, Paralyzed Veterans of America, Veterans Education Success, The Education Trust, U.S. PIRG, The Institute for College Access and Success, American Federation of Teachers, Young Invincibles, National Association of College Admissions Counseling.